Slaying the Chinese Dragon: Can Trump Wield the Sword?

Donald Trump has taken the Republican Party by storm. His populism, coupled with his fiery rhetoric have both endeared him to the Joe Sixpacks of the GOP and made him a pariah of the out-of-touch, establishment, Old Guard RINOs of the party. Perhaps his biggest and arguably most successful rants have taken aim at the People’s Republic of China. However, despite his braggadocio and unabashed bluster, what makes anyone think that Trump would actually be tough on China?

Sure, he struck all the right chords: his administration would stand up to the communist regime in Beijing and protect the rights of the American economy in the process. The Chinese are now engaged in the biggest acquisition spree in their history, as Beijing-backed state owned enterprises have started snatching up some of the biggest European and American companies money can buy. But would Trump, the self-described “dealmaker” for whom money trumps values (pun intended), oppose such lucrative deals on grounds of national security?

Trump certainly paints a dire picture of China’s influence over the United States. In a Wall Street Journal opinion piece recently penned by The Donald, he said the following about the Middle Kingdom’s dealings with the US:

The American people need to be told the truth about our “partner” China. China holds over $1.4 trillion in U.S. debt. The Chinese are, by far, the largest foreign debt holder. As of the end of August this year, the U.S. trade imbalance with China is already at $237 billion, on the way to an annual trade imbalance north of $350 billion. China’s economy is controlled by the government. Any notion that their economy is based on a free-market system is simply not true. If an American company wants access to the Chinese consumers, that company must share its intellectual property, a condition that violates international fair-trade standards, World Trade Organization rules and common sense.

In retaliation, a Trump administration would label China as a currency manipulator, which would result in the imposition of countervailing tariffs and other actions intended to protect American workers and America’s economy. I won’t go into the inane trade policy proposed by Trump; Scott Lincicome already did a stellar job in the Federalist. What does merit a second look is what a Trump presidency would mean for the US corporate sector. Would Trump actually protect America from Chinese intellectual property theft and corporate espionage?

As Marco Rubio pointed out during the Houston debate, Trump’s tough stance against China would run counter to the deals with China he himself has already made. His infamous Trump shirts and Trump ties are made in China, while the suits come from Mexico. When Rubio called him on it, Trump could do little more than stammer back an answer about currency devaluation before attacking the messenger. Not only does it signal a willingness to look the other way on China’s abysmal human rights record, it also undermines any possible credibility he once had when dealing with China as well.

However, the biggest knock against The Donald is his complete ignorance of government. The federal government, for all its woes, already has institutions that work precisely towards safeguarding the economic security of American companies. As an outsider, Trump is unaware of the Committee on Foreign Investment in the United States (CFIUS), the great, unsung hero of American entrepreneurship. Chaired by the US Treasury Secretary, CFIUS is an inter-agency committee that is tasked with reviewing the national security implications of foreign investments in US firms or operations. Basically, its job is to prevent exactly the sort of thing Trump says is happening.

Although CFIUS doesn’t make the front page all that often, it is an important and influential body nonetheless. Begun as a result of the Exon-Florio amendment to the Omnibus Trade and Competitiveness Act of 1988, the committee has become steadily more powerful and influential. Its recommendations, however, are not binding – it is up to the President to sign off or block acquisitions.

The majority of CFIUS’s time and energy is expended on deals involving China, especially over the past few years. Over the past three years for which data has been released (2012, 2013, and 2014), more deals involving China have come before the committee than from any other country. In the first two years of 2016, Thomson Reuters estimates that the committee has seen twenty-two deals involving China, involving a combined total of $23 billion.

CFIUS is not friendly to China. Recent deals that have felt the committee’s wrath and fell through include a $3.78 billioninvestment by the Tsinghua in the American hard disk drive maker Western Digital, an acquisition offer to Fairchild Semiconductor International Inc from China Resources Microelectronics Ltd and Hua Capital Management Co Ltd, and a $3.3 billion sale of an 80 percent stake in the Lumileds division of Philips and China’s Asia Pacific Resource Development and Nanchang Industrial Group, among other international buyers.

In addition, even the biggest Chinese purchase in history, ChemChina’s $43.8 billion bid for Swiss seed and pesticide company Syngenta, looks to be in jeopardy from CFIUS due to Syngenta’s ownership of chemical facilities registered with the U.S. Department of Homeland Security as potential targets of terrorism. Invoking national security, CFIUS could very well ask the company to give up its American assets, a serious blow for a company who draws a quarter of its revenue from North America.

However, CFIUS is not always on the right side of history, which is why the President’s veto power is so important. In 2006, the committee went through its biggest crisis to date after bipartisan Congressional opposition persuaded President Bush to block a deal that would have seen the administration of several American ports shifted to the Dubai-based DP World. Following the scandal, CFIUS was overhauled and saw its powers expanded. Would a President Trump have done the same?

Trump’s credibility as a tough dealer with Beijing crumbles under scrutiny of the facts of his own relationships with Chinese companies. While his aggressive rhetoric helps to winning the hearts and minds of Republican voters after eight years under the rudderless Obama administration, nothing in Trump’s track record indicates he would actually live up to his words.

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